Special Report: Subscribe to Filinvest REIT (FILRT) IPO if price is below…

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We recommend to subscribe to the Initial Public Offering (IPO) of Filinvest REIT (FILRT) if the offer will be priced below …

This price assumes a 5.0% minimum hurdle rate and a 1.0% risk premium. Ultimately, investors would have to decide their acceptable hurdle rate, but we believe the 100 basis points (1.0%) risk premium is justified due to:

a) projected high vacancy rates in Alabang translating to softer rental rates; and

b) possibility of a BSP rate hike by next year which may further limit upside of REITs.



Key Investment Highlights

a) strong tenant profile with BPOs accounting for 88.4% of leased GLA; and b) steady office pipeline of its sponsor FLI which will provide further upside to price in the form of future asset injections.

Downside risks: a) lowest occupancy level among REITs at 90.1% with at least 10% of gross leasable area (GLA) up for renewal every year; and b) higher debt/equity ratio compared to peers.


Pros and Cons of FILRT Investment 


Dividend Yield Analysis

Based on FILRT’s REIT plan dated May 30, 2021, the projected dividend yield is…


To better assess FILRT, we compared it to listed REITs such as AREIT and DDMPR and the upcoming RLC REIT (RCR). FILRT has the lowest occupancy rate among the four, which we believe justifies its higher 2022 dividend yield relative to RCR and AREIT. DDMPR’s higher yield, meanwhile, is likely a function of its tenant base with POGOs and related services accounting for 65% of its total GLA.

We recast FILRT’s 2022 dividend projection given the non-renewal risks of its expiring GLA. We believe a lower average occupancy rate of 90-95% is more prudent especially as its sponsor FLI saw its occupancy rate fall to 76% as of end-March 2021.

Assuming the same pay-out ratio, we arrived at a projected dividend yield for 2022 at …


Overview of FILRT IPO


FILRT Portfolio of properties

FILRT’s development portfolio is comprised of 16 buildings located in Northgate Cyberzone, Alabang and one (1) building in Salinas Drive, Cebu. Total gross leasable area (GLA) is comprised of 299,157 sqm of office and 2,204 sqm of retail space. All properties are PEZA-accredited.

FILRT owns the 16 buildings in Alabang while the land is leased with FLI. Meanwhile Cebu Tower 1, is under a build-transfer-operate (BTO) agreement with the Cebu Provincial Government. It has a remaining lease term of 22.7 years, and is renewable for another 25 years.

Occupancy rate climbed to 90.3% as of April 30, 2021 as Majorel, an existing tenant, leased additional 4,613 sqm of office space in Vector Three. This brings total occupied GLA at 272,258 sqm.

Last 2020, six (6) properties contributed to 52.1% of gross rental income. These properties also accounted for 52.8% of total GLA.


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AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities)

AP Securities (formerly Angping & Associates Securities) is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.